November 16, 2012
Senior Housing Executives Optimistic
Despite the difficult economic market, senior housing and care executives are looking forward with anticipation. It appears that executives in the senior housing and care industries are more optimistic about their performance in the next 12 months, according to a survey of industry executives released by GE Capital, Healthcare Financial Services. The survey questioned 207 executives within the senior housing and assisted living industries.
Seventy-seven percent of executives responding to the survey indicated that they expect stronger performances in the next twelve months, versus the last year. In addition, another twenty-two percent expect similar results year over year.
The survey also provided additional insights as well. As we have discussed in previous posts, acquisition is still foremost in many executives’ minds. Fifty-four percent of respondents said acquisition financing would be their most important financing need over the next year. In addition, sixty-six percent said mergers and acquisitions will be their primary growth strategy over the next twelve months. The desire to acquire existing properties, is not surprising. Many conventional lenders and senior living owners and operators are still very concerned about the risks involved with new construction. They are more apt to seek, and provide, financing for acquiring an already existing, and successful, property where the risk is significantly diminished.
However, not all executives are seeking to grown through acquisitions. Twenty-seven percent of survey respondents plan to grow organically by upgrading or revitalizing properties. Again, upgrades and revitalization are another way to limit risks for both conventional lenders and owners or operators. It is more likely that an already successful senior living facility or assisted living facility would incur less risk by simply making their facility larger or better.
Also unsurprisingly, fifty-four percent of respondents reported that they view assisted living as the most promising grown market in the next year. Assisted living facilities are often easier to operate, because they do not have the same amount of regulations and oversight as a nursing home facility, due simply to the fact that they provide significantly less direct medical care. With fewer regulations and oversight, assisted living facilities also tend to have lower operating costs, providing a greater return on the investment.
The responding executives did mention uncertainty regarding reimbursement and economic volatility as concerns. However, despite those concerns, it certainly appears that they are expecting that 2013 will be a better year than 2012. The optimism of the healthcare executives about the upcoming year may lead to more available capital from similarly optimistic lenders, allowing for more growth through 2013 and onward.